5 Best Fintech Stocks to Buy in January 2022

While the fintech sector is a good long-term investment opportunity, the sector is known for massive volatility. While the broader market volatility was quite low last year, as compared to what we’ve seen over the last decade, fintech stocks were quite volatile.

2021 started off well for fintech stocks but rising bond yields and the continued pivot towards value stocks took a toll on market sentiments. However, there were several new listings in the space. Robinhood, Affirm, Coinbase, Paysafe, and Bakkt were among the fintech companies that went public in 2021. Most of the fintech stocks have fallen sharply from their 2021 highs. Here are the five names that look good long-term buys at current prices.

1. PayPal (NYSE: PYPL)

PayPal stock fell to a 52-week low today amid the fall in tech names. However, if you are looking at exposure to fintech stocks, it is hard to overlook PayPal stock. BMO believes that the sell-off in PayPal stock is overdone and the stock looks set for a rebound. While the brokerage lowered its target price from $278 to $224, it upgraded it to outperform.

This month only, RBC lowered its target price from $298 to $230 while maintaining the outperform rating. The brokerage believes that PYPL is an “under monetized” business. However, it still lowered the target price citing the multiple contraction of peer companies as well as the rising interest rates.

PayPal is a mature yet growing fintech company

While a lot of fintech companies are currently posting losses, PayPal is a mature and profitable company. At the same time, it brings growth to the table with revenues expected to grow in double digits for the next few years at least.

While PayPal’s growth has come down in the short term, like many other pandemic winners, the company’s long-term growth outlook looks strong. It has been expanding its offerings and last year announced a partnership with Amazon which would allow US users on the platform to pay with Venmo.

If you are looking to buy a fintech stock, PayPal is one name that you should consider especially given the tepid valuations after the recent crash.

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2. Paysafe (NYSE: PSFE)

Paysafe went public last year and merged with a SPAC sponsored by Wall Street veteran Bill Foley. The stock has had a dismal ride as a publicly-traded company and recently fell to an all-time low of $3.18. It has since recovered but trades below $4.

PSFE is a penny fintech stock

If you are looking to buy a penny stock in the fintech industry, PSFE looks like a good bet. PSFE is a mature company and is also positive on the EBITDA level. It has significant scale and processes annual volumes in excess of $100 billion. It has also been expanding internationally to spur its growth.

The long-term forecast for Paysafe stock looks positive. The company has a market-leading position in the US iGaming market. As more states legalize sports betting it would bode well for PSFE’s long-term forecast. The fintech industry has a positive outlook over the long term and companies like Paysafe look well placed to capitalize on the opportunity.

With an NTM (next-12 months) EV-to-sales multiple of 11.4x, PSFE looks like an undervalued fintech stock with an attractive risk-reward at these prices.

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3. Coinbase (NYSE: COIN)

There has been a terrible sell-off in cryptocurrencies. A casualty of the crash has been crypto mining companies and exchanges, with Coinbase stock drifting towards its 52-week lows. That said, Coinbase is a good fintech stock to buy for the long term especially if you are bullish on the future of cryptocurrencies.

Coinbase has been trying to diversify its revenues base and is also focusing on institutional investors, NFTs, as well as the metaverse. Last month, the company announced a partnership with Enfusion to offer crypto trading services for institutional investors.

Coinbase is a good fintech stock to play digital assets

Oppenheimer analyst Owen Lau listed Coinbase stock as a top pick for 2022. “For institutional investors who are interested in getting exposure to digital assets, we believe COIN is well-positioned to benefit from it,” they said in the note. Lau added, “More importantly, we are still in the early innings of this development, and we believe many investors are still on the sidelines.” Lau also believes that over time there would be more digital assets available for retail investors to transact.

Higher engagement on the platform and the addition of new digital assets on the platform will help the company offset some of the revenue loss from lower fees. Also, the revenue diversification measures would pay off in the long term.

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4. Affirm (NYSE: AFRM)

Affirm is another good fintech stock to buy after the recent crash. The BNPL (buy-now-pay-later) company went public last year and has since been quite volatile. The stock currently trades at less than half of its 52-week highs. While it may continue to remain under pressure amid the sell-off in growth names, it nonetheless looks like a good fintech stock for the long term.

Truist finds Affirm a good fintech stock

Truist believes that Affirm along with Block and Lightspeed are the top names to play the fintech story. The BNPL sector has seen a lot of action and companies like Block have also entered into the industry. While there are regulatory concerns over the industry, it nonetheless looks among the most promising industries.

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5. Block (NYSE: SQ)

Block stock is another fintech name that fell to a 52-week low today. Like Affirm, it also trades at less than half its 52-week highs. The company sees blockchain and cryptocurrencies as a key growth driver and also changed the company’s name from Square to Block.

Block is a must-have fintech stock

Block is among the must-have fintech stocks. Block CFO Amrita Ahuja believes that there is a $100 billion TAM (total addressable market) for the company’s Seller App and a $60 billion TAM for its Cash App. Currently, Block only has a 2-3% share of these markets

If you are looking to buy a fintech stock for the long-term Block looks a good option and Jefferies has termed it as a “must own stock.” Block has also diversified into the BNPL (buy-now-pay-later) market and last year it announced the acquisition of Australian BNPL company Afterpay.

Jack Dorsey has quit as Twitter CEO which will help him focus on Block. After Dorsey quit Twitter, Bank of America upgraded Block stock. Block’s valuations look quite reasonable after the crash and the stock could deliver good returns for patient investors.

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